The Senate on Monday, June 1; expressed concern over the high cost of crude oil production by the Nigeria National Petroleum Corporation (NNPC).
It said despite the high cost of producing crude oil; Nigeria was not getting much in return on its investment in crude oil production.
Solomon Adeola, Chairman, Senate Committee on Finance, made the observation at an interactive session on Medium Term Expenditure Framework (MTEF); and also Fiscal Strategy Papers (FSP); with officers of Ministry of Finance, Budget and National Planning.
Other agencies of government in attendance at the meeting included revenue-generating agencies such as NNPC; Nigeria Customs Service; as well as Federal Inland Revenue Services (FIRS) among others.
Adeola said: “I want you to take us through why Nigeria’s cost of production per barrel of crude oil is the most expensive in the world.
“Give us the breakdown of what constitutes those costs into variables and the technical cost.
“We want to know what you are doing as an agency of government to bring down this cost,” he said.
He said the Senate was interested in ascertaining other costs of crude production in terms of administrative cost.
“Who determines this cost, with a benchmark of 25 dollars as proposed; Nigeria is just going to have just three dollars as its own return on investment.
“The oil revenue and the mineral revenue as proposed in the MTEF have dropped from almost N8.86 trillion to N3.33 trillion; are you saying that it is a worthwhile investment for us as a nation.
“How do you ensure that Nigeria is being charged the right cost on each barrel of oil.
“In Saudi Arabia, it is four dollars per barrel cost of production; in Russia, it is about three dollars per barrel, Nigeria is 21 dollars.
“We are beginning to be afraid as to why we are channeling all our efforts to this oil and gas if the return on investment is nothing to write home about,” he said.
The Group Managing Director of NNPC, Mr Mele Kyari said the NNPC was working hard to bring down the fixed cost of crude oil production.
Kyari, represented by the Chief Operating Officer of NNPC, Upstream, Mr Yemi Adetunji said further:
“We know that these costs are high; that is why we have decided to go from even the initial approved 25 dollars to 21 dollars per barrel.
“We believe that once we have the new framework in place going forward; we shall even see a lower cost of production from T1 and T2.”
“In other climes, pipelines are on the surface you hardly see them being tampered with; but in Nigeria even when they are buried two meters to three meters deep they are still being vandalised,” he said.
He said NNPC was working with security agencies to ensure that security hitches responsible for high cost were brought down to the minimum.